Practice Management

Technology systems challenged to be all things to all advice firms

Chief technology officers at the T3 Enterprise conference discuss industry's difficulties and solutions

Nov 7, 2019 @ 10:26 am

By Ryan W. Neal

As investment management becomes increasingly commoditized, executives across the financial advice industry see technology playing a critical role in the expanding value advisers can offer clients.

But successfully implementing new technology remains a challenge for banks, broker-dealers, large registered investment advisers and networks that support advisers. At the 2019 T3 Enterprise conference in Ft. Lauderdale, Fla., decision-makers at leading institutional firms shared insight into what is driving adviser technology strategy.

The challenge for these firms is building a technology ecosystem capable of meeting the diverse needs and demands of hundreds or even thousands of independent advisers. For example, LPL Financial is investing in technology for advisers who want to offer services beyond investment management while still supporting the traditional brokers who do not.

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"If we can only support one type of adviser, then we are not supporting everybody that we need to," said Kirby Horan-Adams, an LPL Financial executive vice president and director of research.

The goal is a platform that can be useful to advisers regardless of their business model, Ms. Horan-Adams added. That means building tight connectivity between client relationship management (CRM) systems, financial planning, proposal generation, new account opening and account management for anyone who wants it, while not forcing such features on anyone who doesn't.

"At least for us, it's making it so we have the flexibility to turn it on or off for anybody that wants," Ms. Horan-Adams said.

Technology developers haven't always supported this level of flexibility. Many vendors designed products with individual advisers in mind, instead of large institutions, thus forcing extra work on enterprise firms like broker-dealers to make the product function with oversight and compliance, said Nick Graham, Cambridge Investment Research CTO.

Technology companies also tend to consolidate and build all-in-one platforms to lock advisers in as customers, said Eric Castillo, CTO at Dynasty Financial Partners. Vendors love the software they design, but they must realize each adviser is going to use their product in different ways.

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"There is still, at least on the independent side, a desire to work with best-of-breed and to leverage the specific functionality inside those best-of-breed products," Mr. Castillo said.

Thanks in part to pressure from large firms, technology vendors have shifted strategy in recent years. Rather than try to build entire ecosystems, vendors are more willing to make individual functions of their tools available via application programming interfaces (APIs), said Doug Besso, HighTower chief technology officer.

For example, eMoney Advisor recently announced a new API marketplace for enterprise firms to choose which parts of the overall eMoney software to use. This focus on APIs has enabled large firms to more easily build custom tech stacks for the different types of advisers they support.

"Now we're able to actually take some of those workflows and say, 'I think there's something different for you.' The guys next to you, they're going to have something a little bit different, too," Mr. Besso said. "Not making them change to conform to one thing, that's big a shift for us."

It's not just the software developers who have had to change: Banks and broker-dealers, which traditionally saw in-house technology as a competitive advantage, are now accepting that they use the same open APIs as competitors.

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The advantage today for enterprise firms isn't on delivering individual technology components, it's connecting them all together, Ms. Horan-Adams said.

"We don't need to build an algorithm to do financial planning. We just don't," she said.

What's more important is making sure everything feels seamlessly integrated for advisers and clients who ultimately use the software. "If you do it right, they don't need to know that there's someone else underneath. But that was a big mental shift for us," she said.

Working more with third-party technology comes with increased emphasis on security. While data breaches are always a threat, broker-dealers can offer value to advisers by ensuring vendors are vetted and the entire integrated tech ecosystem is secure and compliant, said TradePMR CTO Dimitri Ilkaev.

"I've worked with different vendors who think that just the fact that they have an API is good enough. It is not," Mr. Ilkaev said.

Security and being able to test the technology before implementation is a big focus for his firm.

Which technologies do these firms find most interesting today? It's not AI or blockchain, though everyone is keeping an eye on how those areas develop.

It's more about perfecting the basics and building a digital experience on par with what consumers get from other technology in their life, Mr. Graham said.

"It's consolidating and curating all of the activities and information to be able to deliver what the adviser wants to do with the client, and do that in an unbroken experience," he said.

The focus on user experience will continue to be a major theme among technology providers.

First Clearing President John Peluso said he is focusing even more granularly on client onboarding.

"Historically, our industry has done a horrible job at creating an easy onboarding experience for clients," Mr. Peluso said. "We've got to overcome that."

Register today for our Future of Financial Advice event on Nov. 20.


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